In January 2010 Preqin carried out a survey of 50 institutional investors to determine current demand for managed accounts.

Concurrently, Preqin surveyed 60 fund of funds managers to ascertain the present supply of managed accounts in the hedge fund industry.

Key findings of the survey include:

Investor Survey:

• 16% of all institutional investors surveyed have a current allocation to managed accounts
• A further 23% of institutional investors are considering a maiden allocation to a managed account structure over the course of 2010

• Greater transparency (41%), better liquidity terms (22%) and increased regulatory oversight (22%) were the three most common reasons states by investors for adding managed accounts to their portfolios

Fund of Funds Manager Survey:

• 65% of fund of funds managers surveyed are either currently running a managed account for their clients or considering doing so in the next 12 months.
  

• Additional transparency (32% of respondents), liquidity (25%), and investor demand (18%) are the most common reasons why fund managers began offering these structures to their investors

• 60% of managers based in N. America currently run managed accounts, compared with 40% of European managers and 44% of managers based in Asia and the Rest of World region.
  

• Bigger managers are more likely to be offering managed accounts, with half of managers with over $500 million in assets under management currently operating a managed account structure.
  

• However, smaller managers are increasingly offering managed accounts. In 2010 we expect smaller firms to begin offering manaed accounts in greater numbers to accomodate growing investor demand.

Amy Bensted, Manager of Hedge Fund Data at Preqin said: “The use of managed accounts is clearly becoming more mainstream, with 16% of investors surveyed currently using them to some degree within their portfolios and a further 23% considering an allocation in 2010. As more and more managers begin to offer this structure, and the range of managed account options available to investors continues to grow, we expect more institutions to add managed accounts to their hedge fund portfolios in future. Managed accounts are able to offer the increased liquidity and transparency that institutional investors demanded following the credit crisis; however the cost in terms of initial investment size as well as internal resources will always be prohibitive for some smaller institutional investors.”